Office rentals still reverting positively. Rental revenue continued to improve yoy to $63.6m as current rents are still above preceeding levels while lower operating expenses provided another bottomline-boosting impact. This more than made up for lower hotel contributions, -33.1% yoy to $20.6m, largely from Pan Pacific Singapore, which was adversely affected by lower Revpar and F&B revenue. Associate income also enjoyed the impact of progressive billings from ongoing projects such as One Amber and Sixth Avenue Residences, which offset the income vacuum from Marina Mandarin and Mandarin Oriental Hotels.
The office segment appears to have stabilized, with a moderation in decline of rental rates. However, outlook remains uncertain due to the large incoming supply. The recovery in the residential segment would enable the group to generate positive returns from its Himiko Court enbloc parcel, with an estimated breakeven cost of $1200-1300psf while the anticipated recovery in the hospitality industry should lead to positive Revpar growth.
Approximately 80% of Singland’s RNAV is derived from office assets. Singland’s share price appears to have priced in the deflation in office market, at an implied c$1100psf of office space. However, near term catalyst remains lacking. Our target price of $5.01 is premised on a 30% discount to RNAV of $7.16, in line with its long-term average discount to asset backing.
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